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File #: 19-1365    Version: 1 Name: 8/5/19 Varnum Am #2 - PURPA
Type: Resolution Status: Passed
File created: 8/5/2019 In control: City Council
On agenda: 8/5/2019 Final action: 8/5/2019
Enactment date: 8/5/2019 Enactment #: R-19-360
Title: Resolution to Approve Amendment No. 2 to Professional Services Agreement with Varnum LLP for Legal Services Relative to MPSC Case No. U-18091 ($15,000.00)
Attachments: 1. U-18091 Varnum Amendment 2 - final
Title
Resolution to Approve Amendment No. 2 to Professional Services Agreement with Varnum LLP for Legal Services Relative to MPSC Case No. U-18091 ($15,000.00)
Memorandum
By contracts entered into with The Detroit Edison Company (DTE) in 1984, the City became and remains the owner and operator of 2 hydroelectric plants at Barton and Superior Dams, committed to sell all the net electrical output to DTE, and DTE committed to purchase all net electrical output. The generation of electricity started in 1986, and the contracts run for 50 years, until 2036.

Under the federal Public Utility Regulatory Policy Act (PURPA) both plants are Qualifying Facilities (QFs), defined as qualifying cogeneration facilities or qualifying small power production facilities, entitle to sell to the electric utility of the City's choosing at a cost that does not exceed "the incremental cost to the electric utility of alternate electric energy." This is also referred to as a "must purchase" obligation on the part of the electric utility. PURPA was enacted to further energy independence at a national level, and to try to solve the country's energy crisis.

In Michigan Public Services Commission (MPSC) Case No. U-18091, DTE filed a proposal seeking, among other things, a change in how its incremental cost is calculated for purpose of its purchases of electricity from QFs, and possibly to avoid its obligation to purchase electricity from QFs such as the City notwithstanding the requirements of PURPA.

The City has made significant investments in the hydroelectric plants at both Barton and Superior Dams, starting with the $3.2 million in hydroelectric bond funds approved to be issued by the voters in early 1983, and continuing since then the cost of millions of dollars. The City relies on revenues from the City's two power purchase contracts with DTE to pay back the capital investments to the hydro facilities at both dams. Reduction of those payment amounts, or the possibility that DTE cou...

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